Monday, November 26, 2007

Skid Row--Arbitrager's Dream


I often wonder what it takes to be successful downtown. I believe that it takes information. I wondered if I could survive downtown if I was lucky enough to get a job. I wondered if I wanted to stay downtown if I were able to return to my mother's house. All of these things are questions that return on a daily basis.

One thing that is always on the mind is housing. Until this morning, I believed that the only place to stay was a $2,000 to $5,000 dollar loft or a SRO room in Skid Row. Feast or Famine. I found out I was wrong.

I was lucky enough to talk to a man that stayed in the T House when I first landed on Skid Row. In fact, he and I arrived at about the same time. He is a security guard. He worked and saved his money, enabling a departure from the T House. He lives on 7th and Broadway in a place that cost less than $700 dollars a month. It provides hope for someone like me who is without funds or employment.

Percentage leases are quite common in retail leases. The landlord picks his tenants on the basis of future growth. The landlord is a de facto underwriter of the fixed cost of real estate space from which the business operates. He takes on a measure of risk in that if the receipts are low, his income is low. If the receipts are high, his income is high.

I am quite sure the public is not aware that the housing companies in Skid Row largely operate on a percentage lease basis. I wonder if the Los Angeles Times knows that. I wonder if the television stations know that. It is not a matter of blowing the whistle. It is a matter of knowing what the parameters of operations, the custom in the area is. If you are going to report on an area, know the area.
It takes more to know about Skid Row than Homeless Statistics.

I am not indicting the way housing companies run their business. However, it is tough for someone who is trying to get ahead. If you are on General Relief (welfare), you can usually get a room with no bath or toilet for $55 a month. Many people have rooms on streets adjacent to loft apartments and pay little. They do not work. They have no intentions of working.

If you get a job in the Skid Row area, and your income increases, your rent increases. the housing companies will take a third of your rent. A man was on public assistance. He received $220/month. His rent was $135.oo. He paid that every month. He evemtually was able to get a job. His income went up to $2100/month. His rent went up $650/month. If he gets a raise, the rent will go up accordingly. Most housing organizations will have you pay 30% of your income for rent. So, in effect, the man has to pay 5 times as much for rent than he did before and receives no corresponding increase in benefits. Let us not lose sight of the fact that these housing companies are getting funding each time a person moves into a room.

Unless the man knows about a building like the one I found out about this morning, he is stuck paying that high rent in a drug infested building and street. I was lucky to find out about the information. I can not use it but at least I know about it. Most case managers in Skid Row do not know about it or they will not direct you to it.

quite often information is given out to people if you have gang affiliations. Two people could be living in the same shelter. They both have to move. One person has been in Skid Row for some time. He has friends on Skid Row. He has friends from his former gang ties that work on Skid Row. The other person knows nothing about Skid Row. The person with the "relationships" has been to every program and rotates to each one on a "need to" basis. The other person has never been to a program prior to landing in the same shelter as the other. The "relationship" person is told he can move into one of two buildings where he can get 3 months of free rent. There is more than one room available, however, the other person is directed to a housing corporation that will charge him rent. The "relationship" person has a history of bouncing around from place to place and has never had a job. He is now trying to increase his income by trying to convince Social Security that he is mentally ill. That, in effect, is a raise for him. The other person is looking for jobs constantly. He asks about the 3 month free rent place but is told that that alternative is not available for him. He asks why but is not given an answer. "it jus isnt" is the only answer that comes.

The housing market information on Skid Row is a matter of breaking through the
"Information Discrimination" barrier that is rampant on Skid Row. IT is not only rampant in the area of Housing, it is rampant in every area of need that you can imagine a person would have on Skid Row. If you are lucky enough to get the information about a service then you must be lucky again. You must find a way to break through the "Price Discrimination" barrier that has infected the "people helping" business on Skid Row.

I have seen people who desperately asked for help in some places. The very first thing they were asked was how much income did they have? What type of Income did they have? Alot of people on Skid row do have income. The question to service providers is the quality and certainty of that income stream. Social Socurity Income is higher than general relief and provides a constant income stream. Those on general relief are limited to 9 months of 200 dollars versus 900 dollars and above for Social Security.

I was under the belief that these shelters were there to help people that have no money and he want to change their lives. I have personally seen people turned away who had no money- told that no beds were available but the person with income were taken right in. That kind of thing is common on Skid Row. The ones who get in are generally the friends of those doing the intake. They come from the same neighborhoods or have become a part of the "Skid Row In Crowd". If you are not in the Skid Row Clique you are out of luck. It is no different than in the real estate business, in general, where a real estate broker may have a "pocket" listing. However, this is life and Potentially death. Many times, people are hanging on the edge when it comes to housing and the protections it offers from the many factors on the streets that can cause harm. In Skid Row, the use of drugs is not the only thing that is risky. Disease from rats, contagious infections, theft, robbery and murder are very much a part of the numerous variables in the risk matrix. I have named only a few.

This kind of issue does not include the missions. I am not aware if they get involved with locating housing for those in the Skid Row area. It is my understanding that they house those within their respective buildings if they are enrolled in their programs. The quality and comfort of housing escalates as one progress in the programs.

Keep in mind that this article is very limited in scope as there is so much to learn about the Skid Row area and the customs and procedures of in obtaining a certain level of security.

I have only mentioned a few of the practices that are common in the housing market on Skid Row. I will not call it the housing market as much as I call it the
"success market" or the "survival market". It is a function of the quality of information to which one has access. As you know, that is the most valuable commodity there is. In finance, arbitrage was a very profitable specialty for those who spotted the disparity in financial information. On Skid Row it determines whether you are inside a building or out on the street.

If there were arbirtragers on Skid Row, they would be very successful.

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